“Over-Invested”

It’s a rare occasion when a CEO admits the company their running has made a mistake. Something that typically happens for one of two reasons, either they are set to retire or they are new to the job and can throw the CEO they replaced under the bus. Paul Hudson the new CEO at Sanofi became the bus driver yesterday when he said that Sanofi “over-invested” in Onduo their partnership with Verily.

Yesterday we speculated what Mr. Hudson would do with Onduo now that Sanofi is basically exiting the diabetes business. What would he do with this “start-up” which was initially valued at $2 Billion and has eaten almost $500 million of Sanofi capital? Would he excuse the expression stick with it now that finally at long last the company seems to have found a sense of direction? Or would he bail?

Well get out the buckets as Mr. Hudson noted yesterday the company would remain an investor in Onduo but would no longer play an active role in the company. For their part Onduo and Verily said in statement they are planning to expand beyond diabetes (perhaps taking a page from the Livongo playbook) but did not mention which chronic conditions they planned to pursue or when this would happen.

This places the Onduo ball firmly back in the lap of Verily which to date has a checkered record with actually bringing something to market. Verily has done lots of deals but so far has little if anything of substance to show for all the money spent and deals done. Still the unit has been able to raise a billion in capital after Google, their parent company, said they would no longer fund Verily. Privately Verily is telling investors they plan to become a public company sometime next year with an expected valuation of over $15 billion.

So does Verily go it alone, taking full control of Onduo? Or do they find another diabetes partner to replace Sanofi? Do they take their recently encouraging results with Type 2 patients and attempt to differentiate themselves from Livongo? Or do they over complicate things and expand into hypertension, weight loss, etc. and play right into the hands of Livongo? Or do they grow a set and go big with their version of Tyler?

The biggest wild card here might not be Verily but Google as the company has so many changes going on in the management ranks that it’s difficult to figure out who’s in charge of what or whom.

Way back in the day when all the techies were making the deep dive into diabetes, we were encouraged yet cautious. Yes, they were bringing with them gobs of money, tons of talent and a fresh perspective. However they also brought with them an equal amount of hubris believing that since they were very good at one thing, they would good at all things. Our concern was that for all this money and talent they would fall into the same traps as those who came before them. That they would repeat the same mistakes as those before them.

As it stands today none of the techies have much to show for their efforts. They have spent millions, made lots of noise and created lots of speculation but when it comes to have something of substance there isn’t much to see.

Apple wasted millions on developing a non-invasive CGM before they got religion and realized this wasn’t just a waste of money but was an unnecessary product. It’s no accident that Apple and Dexcom have grown closer. Verily is also friendly with Dexcom perhaps not as friendly as they were but still friends, nonetheless. Amazon for their part has initiated their diabetes dive but so far has not gone beyond the dog paddle phase.

So the question becomes will Verily reevaluate their commitment to diabetes choosing to scale back or will they go big? Quite frankly there is no third option not at this point. Digital diabetes continues to be the hottest thing going. Tyler is coming and CGM is taking over the glucose monitoring world. Hybrid closed loop insulin pumps are becoming the standard for insulin pump therapy as well. Verily in one way or another has a hand in all of these efforts and could use Onduo to bring everything to together.

The question is can they get beyond the vision thing and actually execute? After almost a billion invested in Onduo it’s about time we find out.